Saudi’s market share in 7 Asian countries declined to 23.2% in the first half of the year

Crude oil imports from Saudi Arabia to seven major Asian markets declined 0.7% in the first half of 2015 compared to the same time period last year, according to the Energy Information Administration (EIA). From January to June 2015, total crude oil imports to China, India, Japan, South Korea, Singapore, Taiwan and Thailand averaged 19.1 MMBOPD, 0.7 MMBOPD higher than in the first half of 2014. The share of these imports from Saudi Arabia averaged 23.2% from January to June of this year, compared to 23.9% in the first six months of last year.

Saudi Arabia

In the first half of 2015, Saudi Arabia exported on average 4.4 MMBOPD of crude oil the seven major Asian markets, making up more than half of Saudi Arabia’s total crude oil exports over that period. The EIA said that some long-term trends within Saudi Arabia’s energy sector may reduce its global crude oil market share further.

Domestically, Saudi’s downstream sector is expanding in an effort to reduce petroleum product imports, decrease its reliance on using crude oil for power generation, and shift towards exporting more petroleum products. In the past two years, Saudi Arabia has commissioned two major refineries, adding 0.8 MMBOPD of refining capacity for a total of approximately 2.9 MMBOPD.

This push towards a more expansive domestic refining capacity has increased the amount of crude input in domestic refineries to a record of 2.4 MMBOPD in May before declining slightly through June, according to data from the Joint Organizations Data Initiative (JODI). If domestic refinery inputs continue to increase, the amount of crude available for export could potentially shrink. The increased volume of refine products, however, could lead to greater market share in the distillate, jet fuel and gasoline markets.

Saudi Arabia

Competition from other countries could also potentially lead to Saudi Arabia holding a smaller share of the market in Asia. Russia is exporting more crude oil to China and Japan and temporarily surpassed Saudi Arabia’s market share in China in May of this year, according to the EIA. Increased imports from Iran once sanctions are removed could also displace imports from Saudi Arabia.

A strategic error?

The Saudi-led decision by OPEC to maintain production despite a global glut of crude oil in November of last year was a move the organization, and Saudi Arabia in particular, hoped would defend its market share. The decision sent shock waves through the oil markets, sending Brent crude prices to a six-and-a-half year low of $42.53 on August 24.

Even as OPEC and Saudi production reached record levels, OPEC’s share of global markets declined to 32.6% from 33.5% in the twelve months preceding June.

Saudi Arabia

This move could prove to be especially dangerous for Saudi Arabia, with the International Monetary Fund (IMF) expecting the country to post a fiscal deficit of 19.5% of GDP in 2015, compared to a deficit of 3% of GDP the year before. The IMF anticipates that the deficit will decline after this year, but it will remain high over the medium-term. The sharp increase in the country’s deficit has prompted Saudi Arabia to look for ways to cut 382 billion riyals ($102 billion), or approximately 10% of government spending, this year in order to soften the blow from lower oil prices.

Tom Petrie, chairman of Petrie Partners, told Oil & Gas 360® during an interview that he believes that Saudi could continue this course for another 12 months at most, but as prices remain low and other OEPC members want to find ways to increase prices again, Saudi may not be forced to cut production alone.

“The Saudis don’t want to go to OPEC and suggest they (the Saudis) go back to being the swing producer. That’s a sucker’s game. If they get a series of requests from other OPEC members, which they have, then they can say ‘if we’re all in this together, and we all observe it, we can come up with some kind of program,’” explained Petrie. “I think they wanted to have this market therapy for all of OPEC. Now they can say that they can bring prices up, but all the members have to observe their cuts.”

Important to Note

OAG360 contacted the EIA for clarification of today’s data release. The EIA analyst’s view was that a 0.7% decline was not significant enough to say the Saudi market share was declining. Due to the variability in the data available, the EIA felt it was better to say that Saudi Arabia's market share had remained relatively stable, even though their data showed a slight year-over-year decline.  


Legal Notice